When I submitted an application for an AXA life insurance policy back in November, my broker informed me that securing the policy would take longer than usual. The reason: a time-consuming New York State regulation regarding policy replacements.

In my case, the application for an AXA 20-year term life product entailed replacing two life insurance contracts: the first an individual term life policy; the other a voluntary worksite product procured through my employer. Regulation 60 of the New York State Insurance Department, which governs replacements of both life insurance and annuity contracts, would delay the issuing of the AXA policy by up to several weeks, the broker told me.

He wasn't kidding. Indeed, he significantly underestimated the lag time. A process that we confidently expected to conclude by end of January has now stretched into late March. And the end is not yet in sight.

Over the course of the last four months, I have repeatedly had to sign multiple policy replacement forms, some of them formalized versions of documents earlier penned in ink. In between these signings, I have had to wait patiently--for days or weeks at a stretch--for an update from the broker on the application's status.

How to account for the delays? While non-regulatory factors have contributed to the long wait (read on), New York's Regulation 60 is the main culprit. Though designed to protect consumers from unwarranted policy replacements, the regulation is clearly excessive. The state's residents, and the agents and brokers licensed to serve them, would be better off with a revised reg permitting a speedier application process.

Provisions of the Reg

Finalized in 1999, Regulation 60 requires an applicant to complete a client authorization form permitting the life insurer to collect information about existing contracts. Thereafter, the insurer must issue a disclosure statement to the applicant, the document providing a side-by-side comparison of old and new policy values. Included among policy projections and disclosures are (1) the primary reason(s) for recommending the new life policy or annuity contract; and (2) the reason(s) why existing policies and contracts can no longer meet the applicant's objectives.

Applicants thereafter sign and date an acknowledgement verifying that they received and read the completed disclosure statement. They then sign the policy application.

In most states, this procedure entails no significant delay. But New York's Regulation 60, amended in November 1999, requires a 26-day waiting period to allow the new insurer time to gather and prepare for the applicant policy values of the proposed and in-force contracts.
If old and new policies were truly comparable, then the nearly three-week delay might be justified on the grounds that applicants need the collected data to make an informed decision. But the wait is truly absurd in situations where the superiority of the new policy to the old--in terms of price, face amount and/or features and benefits--is so obviously apparent.

That's certainly true in my case. The AXA policy for which I applied would replace a 10-year term policy that has ballooned in price by 10 times--to nearly $450 per month--since the contract's term ended in September. Maintaining the worksite policy also due to be replaced only adds to the exorbitant cost.

In fairness, Regulation 60 is not solely to blame for the long wait. An inordinate delay in obtaining policy replacement values from the insurer for the worksite contract added several weeks to the process.

More weeks of waiting are in store, I fear, because AXA now requires an attending physician statement to put to rest an "irregularity" in the lab results connected with the policy app. Unfortunately, my broker tells me, the medical underwriting had to be deferred pending receipt of--you guessed it--policy values of the in-force contracts.

Which brings us back to Regulation 60. The sooner this poorly designed regulation is revised to permit faster issuing of new life policies and annuity contracts, the better it will be for everyone--myself included.

About the Author

Warren S. Hersch is Senior Editor, Advanced Markets & Sales, for National Underwriter Life & Health magazine, which he joined in 2004. He covers practice management and life insurance-funded advanced planning techniques and trends in such areas as executive benefits, wealth transfer/estate planni... More